New Fair Oaks Mall Runs Afoul of Recession

By Jerry KnightJuly 27, 1980

Twenty miles west of the White House, the biggest shopping mall in the Washington area is nearing completion.

Fair Oaks Center will open its doors next week at I-66 and Rte. 50 in Fairfax County with four major department stores operating and two more under construction -- but with only about 15 other shops. More than three-fourths of the storefronts still are empty.

Bigger than Tysons Corner Center and built to handle $200 million in sales a year, Fair Oaks thus will begin business Thursday as Washington's most conspicuous victim of the recession.

Sluggish retail sales and onerous interest rates have canceled of delayed the expansion plans of the mall merchants who fill up the spaces between the major department stores in every shopping center in the country.

Fair Oaks is opening anyway, because the mall's developers, the Taubman Co. of Troy, Mich., and its big stores already were setting their plans in concrete when the downturn hit. For Woodward & Lothrop, Hecht's, Sears and J.C. Penney, it was too late to turn back, and the same was true for Taubman.

Taubman company has a reputation for getting the jump on other developers. It routinely builds its shopping centers in rapidly growing suburban areas a couple of years before there is enough business to support them, then waits for population growth to bring in the customers.

That's what the company did a year and a half ago when it opened the Lake Forest Center in Gaithersburg, which until Fair Oaks was farther from downtown than any other local mall. Lake Forest still has about 30 stores for rent, and merchants complain that it was built five years ahead of its time.

That is not the problem at Fair Oaks says Woodward & Lothrop Chariman Edward K. Hoffman, whose stores are the biggest in both centers.

"Lake Forest was too early; the market wasn't ready for it," Hoffman said. "I dragged my feet as hard as i could on Lake Forest. The timing on this one is about right."

About right for the retail market in Fairfax County, but not so good as far as the nation's business cycle is coconcerned.

Retailers have seen a sales slump coming for months. it hit with a vengeance about the time Taubman should have been signing the leases at Fair Oaks, Simultaneously record interest rates pushed up the cost of borrowing money to pay for building, furnishing and stocking new stores.

"Obviously this is not a strong year for retailing." said Taubman President Robert Larson, who nonetheless predicts that "a very steady progression of stores" will open at Fair Oaks in the next few months.

Garfinckel's says its Fair Oaks store will open Aug. 21 and Lord & Taylor plans to open next spring. "By the pre-Christmas season I expect to see 60 stores." Larson said. By the time Lord & Taylor opens, nearly 100 firms will be operating, he added.

But on opening day, Larson acknowledged, Fair Oaks will lack the "critical mass" needed to draw shoppers, because so many retailers cannot afford to open new stores in the midst of a recession.

A chain that Larson describes as "one of the best-known smaller retailers in Washington," had to put off its plans for a Fair Oaks store. Now the shops neogtiating with Taubman to assure that a storefront will be available when the retailer can afford to expand.

Because Taubman is such a successful developer, it can afford to promise the space to a tenant it wants, rather than rent the store-front to the first person who comes along. Taubman does not have to bring in a schlock shoe store or a discount-jeans-and-gauze-blouses boutique just to pay the rent.

Woodies' Hoffman says Taubman's people are "geniuses" at putting together the mix of merchantts that makes a shopping center successful, and at Fair Oaks Taubman is intent on creating a mall that will draw customers away from established competitors, especially Tysons Corner center.

Like tysons, Fair Oaks' major merchants will be the suburban outposts of the two local department stores, Woodies and Hecht's. Fair Oaks has the two biggest national general merchandise chains, Penney's and Sears, neither of which is in the Tysons area. There is no bloomingdales -- because with only two stores in the Washington area, Bloomies can't afford to put its third unit so close to Tysons.

Garfinckel's will have a bigger store at Fair Oaks than at Tysons, and the opening of Lord & Taylor will give Fair Oaks a fifth anchor store and fashion cashet that Tysons lacks. Also exclusive to Fair Oaks is Conran's the first Washington suburban branch of the British home goods store that opened this summer in Georgetown.

Fair Oaks also has room for another major department store and Larson says Taubman is talking to Saks Fifth Avenue, I. Magnin and Neiman-Maarcus about filling that vacancy.

Several of Fair Oaks' top tenants discussed participating in the Tysons expansion, but instead signed up for Fair Oaks, in most cases ruling out a store in any future Tysons project. 'echt's and Woodies need stores in both places to maintain their saturation of the marker -- even though the stores will compete for the same customers -- but few other big retailers want stores so close together.

Larson says there is "more than enough business to allow for Tysons Corner's continued success and for tremendous growth at Fair Oaks.

"I have no question at all about the strenght of the market. Fairfax County and expecially outer Fairfax County continue to exhibit strong momentum.

"We see Fair Oaks having the potential to be one of the most sussessful centers we have ever done," he added. "And our centers area acknowledged to be the most successful in the nation."

Within five years, Larsons predicts, Fair Oaks will mature into a $200 million-a-year retail center.

Fair Oaks had better be one of the most successful malls Taubman has ever built, becauseit already is one of the most expensive shopping centers ever erected by anybody.

Just to constuct acess roads into the property, Taubman has spent $5 million; Larson said that is more than any other developer has ever laid out to build a path to its door.

The costly road system includes two overpasses spanning heavily traveled Rte. 50, so traffic from either direction canflow directly into the parking lots. Smooth traffic flow, Larson says, gives Fair Oaks an advantage over Tysons, where the traffic pattern is notoriously bad.

The access road plan was dictated byFairfax County officials as part of the deal to settle the zoning dispute that is inevitable every time a major mall is built. The zoning hassles delayed Fair Oaks' about two years, adding further to the cost.

More big bucks went into the vast two-level structure itself, which has the skylights, specially comissioned scupture and hanging gardens that create a state-of-the-art mall.

As is common with most shopping centers today, the major department store buildings at Fair Oaks are owned and built by their tenants. Taubman owns the rest ofthe 1.4 million square feet of retail and public space and the parking lots.